V.Phani Kumar

Japanese shares were dragged down by steelmakers such as Nippon Steel Corp. on a report Toyota Motor Corp. planned to ask its steel suppliers to cut prices sharply. Australian stocks also fell, with Telstra Corp. sliding on a broker downgrade of its target price after the government excluded the telecommunications major from a tender process for a national broadband network.

Thailand stocks rose sharply as investors snapped up beaten-down shares on hopes the appointment of Democrat Party's Abhisit Vejjajiva as the country's prime minister will result in a stable government after months of political turmoil.

Stocks in Hong Kong wavered in a range on either side of break-even.

Jamie Spiteri, head of trading at Shaw Stockbroking in Sydney, said a steep interest-rate cut by the Federal Open Markets Committee may result in an immediate positive reaction in equity markets, "but we are expecting lower rates as a common landscape across most markets to continue."

"A lot of market activity is fading away as we get closer to Christmas and the New Year," he said.

Ben Kwong, chief operating officer at KGI Asia, said a half-point reduction had been factored into the current market prices and was the most likely outcome, as the Fed "will leave some room for a further cut."

Japan's Nikkei 225 Average dropped 1.1% to 8,568.02, while the broader Topix index gave up 2.2% to 828.62.

KGI's Kwong said "window-dressing activity," or buying by institutional investors to shore up the value of their portfolios before the end of the year, continued in the market.

Thai rally continues

In Bangkok, the SET Index rose 2.2% to 446.79 by late afternoon, extending gains from the previous session, as investors cheered the appointment of Democratic Party's Abhisit Vejjajiva as prime minister.

"It's a very significant political development. This is the first time in eight years that we don't have a Thaksin [or Thaksin supported] government," said Kenric Singhakowin, vice president at Royal Bank of Scotland in Bangkok.

He expects the SET Index, which is down nearly 48% in 2008 to date, to reach 500 by early next year, as retail investors and domestic institutional investors return to the market.

Leading the gains in Bangkok, shares of Bank of Ayudhya climbed 6% and Thai Airways International rose 2.8%, while PTT Exploration & Production advanced 0.9%.

Regional detail

The decline came after the Nikkei business daily reported that the auto giant plans to ask steelmakers to cut prices of sheet steel by about 30% during the next financial year because of weakening demand for automobiles and expectations that raw-material prices will drop further. Automakers and steel producers negotiate prices once a year, with the prices agreed upon by Toyota and Nippon Steel serving as an industry benchmark, it added.

Among other exporters, Sony Corp.
SNE, +1.13%
(6758) dropped 5.9% and Honda Motor Co. (7267)
HMC, +0.63%
skidded 5.4% on concerns about the impact of a strong yen on their earnings.

In Asian currency trading, the U.S. dollar bought 90.19 yen, compared with 90.54 yen Monday. A year ago, the dollar was buying more than 110 yen, but has steadily lost ground against the Japanese currency in the wake of the global financial crisis.

Shares of Toshiba Corp. (6502)
TOSBF, -0.15%
fell 1.5% on a Nikkei report the company plans large-scale production cuts at its semiconductor plants. Toshiba plans to halt production at its Kitakyushu plant for a month, in addition to a three-week suspension at another site in Kyushu and suspension of some production lines at its Yokkaichi plant in Mie prefecture.

The downgrade came a day after Telstra announced it was excluded by the government in the tendering process for the broadband network because it hadn't included a plan for involving small and medium enterprises in building the network when it submitted a proposal last month.

Shaw Stockbroking's Spiteri said the news "had an effect on Telstra's share price and subsequently on some market confidence because there was a significant amount of capital which had been directed toward Telstra as a defensive play during these uncertain times."

Shares of China Cosco Holdings Co. (1919)
CICOY, +1.00%
dropped 0.7% in Hong Kong and 5.2% in Shanghai, after the shipping company said it had incurred a loss of 3.95 billion yuan ($577 million) on forward freight agreements because of a sharp decline in marine freight rates. See full story.

Shares of market heavyweight HSBC Holdings ended unchanged in Hong Kong after the bank said it has a combined exposure of about $1 billion, having provided financing to a small number of institutional clients who have invested in the collapsed funds group. See full story.

January crude-oil futures rose 47 cents to $44.98 a barrel in electronic trading, after dropping $1.77 to $44.51 a barrel Monday on the New York Mercantile Exchange.

On Wall Street, the Dow Jones Industrial Average
DJIA, +0.29%
dropped 0.8% to 8,564.53, the S&P 500 index
SPX, +0.30%
declined 1.3% to 868.57 and the Nasdaq Composite
$COMPX
gave up 2.1% to 1,508.34.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.